Do you know your risk? - Page 363
Page 363 of 368 FirstFirst ... 263313353359360361362363364365366367 ... LastLast
Results 3,621 to 3,630 of 3678

Thread: Do you know your risk?

  1. #1
    Educator
    Join Date
    Jun 2013
    Posts
    1,105
    Promo (¢)
    15
    Thumbs Up
    Received: 579
    Given: 191

    Do you know your risk?

    Hi, traders!

    Many things were discussed about risk, yet I observe very frequently that traders don’t understand risks associated with trading. So, I’ve decided to write this article which is highly recommended for reading for beginner traders.
    First major fallacy about risk sounds like this: «risk for my position is equal to size of possible loss for my positions, therefore it is known and can be easily calculated»

    In reality, risk is not just size of your loss in case you are stopped out from your position, but also possibility (probability) of this event. I was reflecting on this point in article «Frequency and magnitude»

    Second major fallacy about risk sounds like this: «Risk can be eliminated though good analysis». Here, on the forum, you may see a lot of posts confirming this fallacy. In reality. Think about this point: your analysis is based (everybody’s analysis) on incomplete and conflicting information. As most of us are retail traders employing chart analysis, we see only price, we don’t have access to real information about liquidity, large orders, real volume. But marketplace is so huge and uncertain that even largest players can’t move the market in the long term perspective. Bank of Japan, which was intervening the market too often, was only able to create pullback, and rarely a reversal. Direct interventions with large orders were not successful, however they were able to reverse a trend through monetary policy (creating conditions for reversal, but not fighting the market itself).
    Let’s categorize types of risks that trader faces with in trading.

    1. Risk of uncertainty.

    That’s risk number 1 in trading. Traders with several decades of experience say that “We might think we know but in reality we don’t know”. Before making forecasts and claims about the market, don’t forget to add magic words «I think». «I think I know what’s going on», «I think that price will reach this level…» e t.c.
    It’s impossible to eliminate this risk completely. We do some analysis, but every analytical view will help us to shift probability in our favor, not predict. With analysis we increase our odds of success. If you accept that you have highly uncertain situation in each trade, you will never go «all in», employing 100% of your leverage. Actually, 50:1 is also high leverage, statistically you will blow up your account with this leverage. Odds are too low that will be able to trade perfectly and survive. 10:1 is better, in this case will have the chance to survive. That’s statistics.

    2. Risk of counterparty.

    Also, this risk is under your control. Many brokers can cancel your trades, execute them with wrong prices, and eventually refuse to pay you your profit. Forex brokers are not really in the business of matching trades between market participants, they rather act as market makers and carefully hedge their overall position. It’s important to choose brokers with reliable technology of hedging and transparent liquidity providers. Roboforex, for instance, has Currenex as major liquidity provider, using streaming prices from CMS. Know more here

    3. Risk of not knowing your trading instrument.

    You might be surprised that traders often are not completely aware of trading conditions for instruments they trade. For example, traders can open multiple positions, creating huge overall position (though, hedged). Of course, they will be charged for swaps. «Charged for… what?»
    Traders often don’t know what news and economic releases affect prices of assets their trade. If you were day trading on EURUSD previous Thursday (June 5) and was not aware of the fact, that market was expecting claim of interest rate, you could be surprised and not always with unexpected profit (rather with unexpected loss).

    4. Risk of complexity.

    The more complex your trading is, the more hidden risks you have. Let’s say, you employ 2-3 trading instruments with different trading systems on each of them, in this case complexity of your trading is increased and you might expose yourself to nonlinear cascading effects.
    Experienced traders do not optimize parameters of their indicators. Why? Is seem to be very obvious and useful thing to optimize your system. But in reality if you optimize your system so that your system generates income much greater than average and underperforms in other markets at the same time, you start accepting additional risks that market conditions (volatility, market structure) will change and bring your more losses than you were expecting.

    5. Risk of not knowing your risk.

    And last but not least – you might even be unaware that you have some risks. Your internet connection maybe unstable, your chart maybe inaccurate, your trading software may crash, your stop-loss maybe not executed (though you thought that it was) and other and other.
    Like Nassim Taleb had said – «we prepare to fight against terrorism, but can be harmed from diabetes»

    Good luck and accept your risks!

    Not allowed!

  2. #3621
    Trader
    Join Date
    Nov 2017
    Posts
    6,722
    Promo (¢)
    6,120
    Thumbs Up
    Received: 33
    Given: 68
    Not only that I know about my risks, I also know the way to make sure that I regulate it and then make sure that I don't take a lot of losses. Knowing your risk is one thing and then being able to make sure that you do the right thing to avoid losing to it. I know my risks and then I have been able to have my emotions in controlled so that I don't go against my rules.

    Not allowed!

  3. #3622
    Trader
    Join Date
    Feb 2018
    Posts
    2,112
    Promo (¢)
    870
    Thumbs Up
    Received: 11
    Given: 5
    i know my risk because one thing i want to make sure i never want big risk now. i want to learn trade because i thought i was good but i am not so i am moving slowly and also thinking to increase experience as well. so i am doing my best to gain experience and doing my best to learn market as well because if we know about market we can avoid loss or can reduce. but if we do not have experience we can lose easily

    Not allowed!

  4. #3623
    Trader cutiekc's Avatar
    Join Date
    Dec 2013
    Posts
    23,043
    Promo (¢)
    7,260
    Thumbs Up
    Received: 158
    Given: 236
    I do know my risks and then I know what I should do to ensure that I don't make mistakes and loss my money. A lot of traders often do loss their money even when they know the risks, that is because they know the risks but then again, they don't know the right thing to be done. Trading takes a whole lot of learning, when you know your risk, work on it and avoid losing like other traders.

    Not allowed!

  5. #3624
    Rookie
    Join Date
    Nov 2017
    Posts
    5,253
    Promo (¢)
    0
    Thumbs Up
    Received: 34
    Given: 87
    I know my risks and that has always been the part of the business. If you don't know your risks, then be sure that you will loss a lot of money, but when you know your risks and then you know how to control it, you ain't gonna be losing like so many other traders. Therefore, that is the reason why I have always been able to have given quality time to learning, because that is the best way to become a profitable trader.

    Not allowed!

  6. #3625
    Rookie
    Join Date
    Jul 2014
    Posts
    6,756
    Promo (¢)
    2,160
    Thumbs Up
    Received: 106
    Given: 66
    Quote Originally Posted by Real View Post
    I know my risks and that has always been the part of the business. If you don't know your risks, then be sure that you will loss a lot of money, but when you know your risks and then you know how to control it, you ain't gonna be losing like so many other traders. Therefore, that is the reason why I have always been able to have given quality time to learning, because that is the best way to become a profitable trader.
    We ourselves can know our risk capacity best because we ourselves know our resources and know the liabilities and obligations we need to meet. But in the urge to earn more profits faster many of us get careless in the heat of trading and counter the margin calls and stop outs. From beginning we should understand that increasing risks magnifies the profits and losses and also the stress of the trader.

    Not allowed!

  7. #3626
    Trader
    Join Date
    Nov 2017
    Posts
    6,722
    Promo (¢)
    6,120
    Thumbs Up
    Received: 33
    Given: 68
    I know my risks and then I am willing to make good corrections of my past mistakes, most of us do know our risks, but we then did allowed our emotions trick us and then we took a whole more risks by being over confident and that shows lack of discipline. Right now, no matter what, I have always been ready to make sure that I don't over trade or take bad trades, I just pick the best signals I have seen on the chart.

    Not allowed!

  8. #3627
    Rookie Rylai's Avatar
    Join Date
    Oct 2017
    Posts
    1,557
    Promo (¢)
    2,200
    Thumbs Up
    Received: 9
    Given: 21
    Quote Originally Posted by Makaveli View Post
    I know my risks and then I am willing to make good corrections of my past mistakes, most of us do know our risks, but we then did allowed our emotions trick us and then we took a whole more risks by being over confident and that shows lack of discipline. Right now, no matter what, I have always been ready to make sure that I don't over trade or take bad trades, I just pick the best signals I have seen on the chart.
    Risk will be limited each time we trade when we remember to set stop loss. too bad for our whole past mistakes which were actually closed in bad trades due to bad analysis and lack of knowledge. back then, we didn't know anything much about our own risk and easily went for random trades which eventually gave us those bad experience. luckily for us, we can take them as our learning and now we're advancing to be a better trader.

    Not allowed!

  9. #3628
    Rookie
    Join Date
    Aug 2014
    Posts
    3,308
    Promo (¢)
    1,680
    Thumbs Up
    Received: 10
    Given: 9
    Quote Originally Posted by Rylai View Post
    Risk will be limited each time we trade when we remember to set stop loss. too bad for our whole past mistakes which were actually closed in bad trades due to bad analysis and lack of knowledge. back then, we didn't know anything much about our own risk and easily went for random trades which eventually gave us those bad experience. luckily for us, we can take them as our learning and now we're advancing to be a better trader.
    We have reached a bit far in this business and at this stage it is expected that we understand our risks and trade with realistic views. By placing a stop loss we can be more relaxed and stress free since we can be assured that we will not lose a big sum. Its a fact we have to accept losses in trading every now and then, to do it peacefully we need to keep our risks low.

    Not allowed!

  10. #3629
    Trader
    Join Date
    Sep 2017
    Posts
    1,745
    Promo (¢)
    8,820
    Thumbs Up
    Received: 7
    Given: 19
    Dealing with risk is the very right thing we should be prepared about because good risk management will give traders the possible chance to come up with good profits from forex. Management of risk is the ideal thing to follow on this trade and we should be ready to build a strong trade that will enable us work on our goals and see we can achieve great result from forex. Risk should be managed and every effort to manage risk should be followed to achieve maximum success.

    Not allowed!

  11. #3630
    Trader
    Join Date
    Nov 2017
    Posts
    6,722
    Promo (¢)
    6,120
    Thumbs Up
    Received: 33
    Given: 68
    I know my risk and then I know the whole thing I should follow when trading. Forex trading is a very risky business and so it is our duty to always ensure that we are not taking too much risks, first of all, we should be the sort of trader that can control our emotions, once we have that been done, I think we can become more successful in the business. I know my risks and then I know also that I can't make money without taking risks.

    Not allowed!

Page 363 of 368 FirstFirst ... 263313353359360361362363364365366367 ... LastLast

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •